Call of the Wolf

Long before Martin Wolf became the chief economics columnist for the Financial Times, he wrote the newspaper letters–lots and lots of letters. It was the early 1980s, the height of the Thatcher era, and Wolf was running research at a think tank in London that was sympathetic to the government’s pro-trade agenda. The FT’s letters section became the ideal place to take to task all those who would stand in the way of the first waves of globalization.

With a British gentleman’s cutting subtlety, Wolf parried with other letter writers over everything from tariffs to agricultural subsidies to the German textile industry. He assailed the arguments of a Mr. Mitchell as “ ’codswollop’ raised to a high power.” Taking apart the logic of one Mr. Calvert, Wolf quoted nineteenth-century French economist Frédéric Bastiat: “Absurdity is the limit of inconsistency.” Arguing with a Mr. Smith about the oil shock of 1983, Wolf’s didactic style was on full display:

How does Mr Smith reach his conclusion? The unstated argument appears to go as follows: in order to prove the economic optimality of competitive general equilibrium, one needs to assume a full range of contingent and future markets. A full range of such markets does not exist. Consequently, the actual equilibrium is not optimal. Centralised co-ordinating agencies might, therefore, improve on the market. The actions of the Japanese and other governments are generally held to improve on the workings of the market. Accordingly, co-ordinating action by the British Government would improve on the market.

When stated in the above way, the argument looks a little silly.

Today, Martin Wolf has moved on to bigger targets than Mr. Smith. Hired as an editorial writer by the FT in 1987, he is arguably the most widely trusted pundit of the current economic crisis. Consider the people who count themselves fans of his column. Larry Summers: “He is probably the most deeply thoughtful and professionally informed economic journalist in the world at this point.” Harvard economist Kenneth Rogoff: “He really is the premier financial and economics writer in the world.” Mohamed El Erian, CEO of PIMCO, the world’s largest bond investor: “He is, by far, the most influential economic columnist out there. His columns are eagerly anticipated.”

Knowing that Wolf is widely read and highly esteemed, major players in the economic world court his approval. The day after Treasury Secretary Timothy Geithner announced details of the Public-Private Investment Program, he called his old friend Wolf, who he knew was working on his Wednesday column. Geithner wanted to explain–and defend–the initiative. Wolf listened politely and, the following day, slammed the program as the “vulture fund relief scheme.”

“You cannot measure influence, but you can feel influence,” says University of Chicago economist Raghuram Rajan. “And I think he has it.” What makes this influence so fascinating is that, more than two decades after he became a full-time journalist, Wolf’s columns resemble nothing so much as his frantic, dense, cutting letters to the editor. They are learned, baroque, and quite frequently terrifying.

Wolf was born in 1946 in London. His father Edmund had been a playwright in Austria but managed to slip out of the country before the Holocaust wiped away most of his family. In London, he met Martin’s mother, a Jewish refugee from Holland whose family had also been killed. Growing up in the shadow of World War II and the Holocaust, Wolf was wary of anything outside the reasonable center. “It made me extremely suspicious of political extremism, on both the left and the right, a strong believer in democratic freedoms, which was very much my father’s position,” he told me.

A vivid memory of doom may have also driven Wolf into economics, which he sees as the underpinning of everything that can possibly go wrong. He was, he says, “very, very much formed by the sense that the catastrophe that befell my parents’ generation was in large part because of the Great Depression, which itself was the result of huge economic policy blunders.” References to the 1930s pervade his writing.

After studying economics at Oxford (where he identified as a social democrat), Wolf got a job in 1971 at the World Bank, which was then under the stewardship of Robert McNamara, the disgraced former U.S. defense secretary. McNamara, in Wolf ’s telling, was a forceful leader. “He was utterly and completely in control of the institution, of the facts, of the objectives that he wanted to achieve,” Wolf recalls. “And that made him quite impressive—I mean staggeringly impressive.”

According to Wolf, McNamara had a very firm idea of how to fix poverty in the developing world: Poor countries were poor because they didn’t have enough capital. Ergo, raising investment levels was the key to creating prosperity. To achieve this goal, McNamara pushed for loaning more and more money to developing countries, leading them, eventually, into massive debt crises in the 1980s.

Wolf was disgusted enough by these policies that he began to move to the right, and he eventually left the Bank in 1981. He says the experience taught him that “it’s really, really, really hard for large institutions to make intelligent decisions.” Wolf swore he’d never work in such a bureaucracy again.

In 1987, after working for six years at a pro-free-trade think tank in London, Wolf was courted by Sir Geoffrey Owen, then editor of the Financial Times. Wolf had written a few stories—and more than a few letters—for the paper, and Owen wanted to take him on as his chief economics editorial writer. Wolf, who shared the FT’s basic free-trade stance (although he was to the right of the paper), accepted. For nine years, he wrote with no byline, occasionally advocating stances he did not espouse, which rankled after his experience at the World Bank. Finally, in 1996, Wolf was given his own column on international economics.

It has been 28 years since Wolf left the World Bank, but he still sees his journalistic work as an antidote to the top-down style of decision-making he witnessed there. Now, he sees the same destructive behavior in the private sector. “If you go from Chuck Prince”—the former CEO of Citigroup—“to the people who were actually designing these securitized assets or, even more, the people who are making the subprime loans, you’ve probably got ten or eleven layers . . . that the people have at the bottom to get all the way to the top—filtered through all the people in between, whose job it is to give the impression to the people at the top that everything’s going smoothly. Because that, of course, is what they’re being rewarded on,” he says. “So, if there are minions at the bottom . . . saying, ‘Well, actually, this isn’t making any sense,’ if there were people like that, this information simply wouldn’t get up through the machine.” His job, he says, is to give voice to those minions who are unable to send their criticisms up the chain of command.

Moreover, the current crisis has re-awakened Wolf’s dread of the 1920s and ’30s. “I never expected, I have to say, to be as close to those experiences again in my lifetime,” he explains somberly. As a result, he has swung back toward Keynes—closer to his ideological roots— and he frequently criticizes the Obama administration from the left.

To understand Wolf’s influence, one must first understand his audience. They are dedicated Financial Times readers, and Financial Times readers are some of the top earners, spenders, and decision-makers in the world. “I’m writing for the people who are doing these things, who are running these things, both governmental and politicians and financiers,” he told me while vacationing in Liguria, Italy, where he has spent summers since childhood. (His family has a house there, and, every August, Wolf returns. “It’s an important break,” he says. “Unlike Americans, I believe in long breaks for reading and thinking. I don’t understand the American culture of one-and-a-half or two weeks of holiday a year at the maximum.”)

Befitting someone who writes for insiders, his style is brazenly dense. His FT columns come with footnotes and charts. Moisés Naím, the editor of Foreign Policy, recalls working with Wolf on a cover story on the coming market crash in 2000. “He makes no concessions to the reader,” Naím says. “There was a bit of back and forth about what he felt was ‘self-evident.’ ” His prose, even to the educated layman, can be hard to crack. “He’s writing for very well-informed readers,” says New York Times columnist Paul Krugman. “Obviously, I have a similar space, and I don’t write things that look like what Martin writes because I think I’ll lose too many of my readers.”

Wolf is staggeringly well-connected within the elite circles he is writing for. El Erian was a Wolf protégé, as was current British education minister Ed Balls. Wolf’s circle of friends and acquaintances includes the likes of Indian Prime Minister Manmohan Singh and Mervyn King, governor of the Bank of England. “I don’t know if there’s any significant central banker I don’t know,” he told me with a flat matter-of-factness. But part of his appeal is that he doesn’t hesitate to criticize friends. He is close with Geithner and Summers yet has repeatedly attacked their policies for not going far enough.

His fans cite his logical rigor, a faculty he loves to engage face to face. In FT editorial meetings, he’s known for packaging an extreme position in provocative language in order to make others clarify their own stance. “He starts by summarizing your argument, and, two minutes in, he’s trashed your argument,” says FT business columnist John Gapper, who used to be Wolf’s editor. “And that’s when you realize he’s only just getting going.” FT editor Lionel Barber says he stands up to Wolf, whom he calls “Two Brains,” “once every five years.”

It is these qualities—the deep erudition, the sense of proximity to the temples of power—that have made his columns about the financial crisis so impossible to ignore. When the bolts of rhetorical thunder emerge from his dense cloud of prose, you take notice. A typical column warns that we risk nothing short of “the mother of all meltdowns” or the end of “liberal trade.” Passages offer ominous predictions:

Yet the idea that a quick recession would purge the world of past excesses is ludicrous. The danger is, instead, of a slump, as a mountain of private debt. . . topples over into mass bankruptcy. The downward spiral would begin with further decay of financial systems and proceed via pervasive mistrust, the vanishing of credit, closure of vast numbers of businesses, soaring unemployment, tumbling commodity prices, cascading declines in asset prices and soaring repossession. . . . This would be a recipe not for a revival of 19th century laissez faire, but for xenophobia, nationalism and revolution.

By the time you put down a Wolf piece during the worst of the crisis, you could have been forgiven for thinking that we were hurtling toward a disaster of even more cataclysmic proportions. Although he may have written his columns with an audience of technocrats in mind, his jeremiads—clearly informed by Wolf ’s fear of repeating the Great Depression— broke through to a much wider audience. (They constantly rank among the most read on the FT’s website, and even Matt Drudge, the least academic man in the world, links to them.) What’s more, it is their very denseness that commands attention. To the broader public, suffering from grave confusion and outright panic, his pieces may be frightening, but their learnedness also provides a sense of odd comfort: Here is a solid view of the path ahead.

When columnists are too close to power that’s usually cause for concern. The classic example was Joseph Alsop, who used his op-eds to fight bureaucratic battles on behalf of his high-ranking friends. But Wolf’s readers feel a sense of gratitude for his closeness to the world’s central bankers and finance ministers and other denizens of the Davos set. Because when he zings them, or pushes the panic button, at the very least, we know they are listening.